Roll Over 401k to Vanguard for access to closed funds

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Topic Author
detroitbabu
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Joined: Tue Feb 12, 2008 2:07 pm

Roll Over 401k to Vanguard for access to closed funds

Post by detroitbabu »

My previous employer has a good 401k plan with index funds with very low expense ratios. I am paying an average of 0.056% in expense ratio for the 4 index funds I am invested in (Large Cap Index, Small Cap index, International Index, Bond Index). I do not have to move the money and can leave the money in my old 401k for as long as I want.

When I look at equivalent funds, the expense ratios for VG funds are a little higher. The performance of VG funds is essentially the same as my 401k funds as they both are tracking an index.

The roll over if I decide to do it, will put me at flagship status.
Should I move my money for getting access to closed funds like PrimeCap, PrimeCap core and Cap Opportunity?
I know that these are all large cap growth funds but I can adjust the allocation so my overall allocation is according to my desired AAP.

Anything I am overlooking and should consider before making a final decision?

Thanks.
robertalpert
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Joined: Wed Aug 22, 2007 10:09 pm

Re: Roll Over 401k to Vanguard for access to closed funds

Post by robertalpert »

It may be easier to manage the portfolio when all at one brokerage.

Is the 401K traditional or roth?

If roth, the employer match portion may be pre-tax and could result in comingled funds in your Vanguard IRA, unless you sort out and separate the amounts in advance.
jebmke
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Re: Roll Over 401k to Vanguard for access to closed funds

Post by jebmke »

Looks like you are in Michigan (based on your username). I'd suggest checking Michigan tax law and maybe bankruptcy law. Some states treat distributions from qualified plans differently than IRAs. In my state (Maryland) for example, a dist from a qualified plan is eligible for the pension exclusion for MD income taxes, albeit limited. An IRA is not eligible even if it started out its life as a qualified plan.
When you discover that you are riding a dead horse, the best strategy is to dismount.
Lou354
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Re: Roll Over 401k to Vanguard for access to closed funds

Post by Lou354 »

Why do you want to invest in Prime Cap and Cap Opportunity? Would you be rolling over from your 401k to invest in them if they weren't closed to non-flagship new investors? Often the perceived scarcity of a good makes it seem more desirable than it would otherwise.
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JamesSFO
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Re: Roll Over 401k to Vanguard for access to closed funds

Post by JamesSFO »

Rolling over might close access to a backdoor Roth... Not sure if that's relevant for you but worth mentioning
Topic Author
detroitbabu
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Re: Roll Over 401k to Vanguard for access to closed funds

Post by detroitbabu »

robertalpert wrote:It may be easier to manage the portfolio when all at one brokerage.

Is the 401K traditional or roth?

If roth, the employer match portion may be pre-tax and could result in comingled funds in your Vanguard IRA, unless you sort out and separate the amounts in advance.
It is all traditional 401k. No Roth component.
Topic Author
detroitbabu
Posts: 316
Joined: Tue Feb 12, 2008 2:07 pm

Re: Roll Over 401k to Vanguard for access to closed funds

Post by detroitbabu »

jebmke wrote:Looks like you are in Michigan (based on your username). I'd suggest checking Michigan tax law and maybe bankruptcy law. Some states treat distributions from qualified plans differently than IRAs. In my state (Maryland) for example, a dist from a qualified plan is eligible for the pension exclusion for MD income taxes, albeit limited. An IRA is not eligible even if it started out its life as a qualified plan.
I will check into that. Thanks.
Topic Author
detroitbabu
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Joined: Tue Feb 12, 2008 2:07 pm

Re: Roll Over 401k to Vanguard for access to closed funds

Post by detroitbabu »

Lou354 wrote:Why do you want to invest in Prime Cap and Cap Opportunity? Would you be rolling over from your 401k to invest in them if they weren't closed to non-flagship new investors? Often the perceived scarcity of a good makes it seem more desirable than it would otherwise.
Greed, I guess. The performance of those funds has been pretty good when compared to S&P. I know the risk is higher than S&P too but I plan to invest minimum required to get into admiral funds.
Topic Author
detroitbabu
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Re: Roll Over 401k to Vanguard for access to closed funds

Post by detroitbabu »

JamesSFO wrote:Rolling over might close access to a backdoor Roth... Not sure if that's relevant for you but worth mentioning
Please edumakate me. I don't understand the connection between backdoor Roth and roll over 401k.
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BrandonBogle
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Re: Roll Over 401k to Vanguard for access to closed funds

Post by BrandonBogle »

detroitbabu wrote:
JamesSFO wrote:Rolling over might close access to a backdoor Roth... Not sure if that's relevant for you but worth mentioning
Please edumakate me. I don't understand the connection between backdoor Roth and roll over 401k.
If you have no pre-tax IRAs, you can do backdoor Roths easily. However, if you rollover your pre-tax 401k to a pre-tax IRA, then paying taxes on conversion is prorated amongst all of your pre-tax IRAs, and thus, part of what used to be your 401k will be taxed for the conversion. Assets inside a 401k are exempt from that prorating.

https://www.bogleheads.org/wiki/Roth_IR ... tributions
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